Kvale acts for foreign ship owners in a direct action case against a Norwegian P&I underwriter and the alleged tortfeasor following a collision in the Singapore strait

Recently, the Supreme Court rendered a verdict on the issue of whether Norwegian courts have jurisdiction in the matter. The court of appeal had concluded that there were jurisdiction in Norway both in the direct action case and in the tort case, whereas the Supreme Court suspended the court of appeal’s decision on the basis of incorrect application of the law.

The main issue before the Supreme Court was whether the direct action case should be based on the article 2(1) or article 11(2) of the Lugano convention. The court of appeal had assumed that the both article 2(1) and article 11(2) were applicable and provided jurisdiction in Norway.

The majority of four justices concluded that article 11(2) was the correct basis for these types of direct actions, whereas one justice concluded that also article 2(1) was applicable for direct actions at the underwriter’s own domicile.

Pursuant to article 11(2), it is necessary to identify the applicable law in order to decide whether direct action is permissible after the applicable law. The court of appeal had assumed that section 7-6(5) of the Insurance Agreements Act (“IAA”) was a choice of law-provision deciding that Norwegian law applies for direct actions initiated against Norwegian underwriters before the Norwegian courts. The majority of three justices disagreed, whereas the minority of two judges agreed with the court of appeal that section 7-6(5) of the IAA was a choice of law-provision. The court of appeal’s decision was therefore suspended due to wrong application of the law. It is important to highlight that even though the majority concluded that section 7-6(5) was not a choice of law-provision in its own right, the Supreme Court stated that the provision can be given “significant weight” when the court of appeal is re-considering the issue. Thereby, the Supreme Court has given a clear guidance to the court of appeal that Norwegian law shall apply also when the matter is re-considered by the court of appeal.

The majority of four justices did not consider whether the tortfeasor could be brought into the case. The minority of one justice was of the view that the Lugano convention provided for Norwegian jurisdiction in the damages case, so that the alleged tortfeasor can be brought in for the Norwegian courts.

Even though the Supreme Court has not decisively concluded on how to resolve the choice of law-issue for direct actions, the Supreme Court has given relatively clear guidance as to how section 7-6(5) of the IAA shall be weighed in cases like this.